I received my wife’s rental income in my NRO account. Will I be taxed on it?

My wife and I are both NRIs. She owns a residential property in India which she has rented out. She requested the tenant to credit one month’s rent into my NRO account instead of hers since I’m due to visit India shortly and can use those funds for local expenses. The resident tenant deducted TDS under my wife's PAN and transferred the rent to my NRO account. Will I be taxed on this amount since I have received it in my NRO account?

- Name withheld on request

From an income tax perspective, the rental income belongs to your wife since she is the legal owner of the property. She is responsible for reporting this income in her tax return, and the fact that the payment was made into someone else's account does not change this. Furthermore, the tenant has deducted TDS on the rent using her PAN, correctly assigning the income to her.

Since the rental income is your spouse's, it cannot be taxed in your hands simply because the rent payment was credited to your NRO account.

Also read | Claiming home loan tax benefits on multiple properties in India: What you need to know

Note that under FEMA regulations, it is not advisable to receive rent payments in your NRO account. It may amount to a contravention since the rent belongs to your spouse. To avoid potential issues under FEMA, future rent payments should be directed to your spouse's NRO account. This will also help streamline accounting and reduce the likelihood of misattributing income.

I have earned capital gains of ₹54,00,000 upon exiting a startup after about four years. This is probably the only income I will have in FY25. What are the tax implications?

- Name withheld on request

Since you have held the unlisted shares for about four years, the gains qualify as long-term capital gains as they exceed the required holding period of 24 months.

Through the Finance (No. 2) Act, 2024, the tax on long-term capital gains earned from the sale of unlisted shares has been increased from 10% to 12.5% (plus surcharge and cess). You may examine the appropriate Double Taxation Avoidance Agreement (DTAA) to check if it has more beneficial provisions.

Also read: Should you transfer fixed deposits to a HUF account?

It's important to note that NRIs do not receive the basic exemption limit for long-term capital gains that is available to resident individual taxpayers, irrespective of whether they choose the old or new tax regime.

Harshal Bhuta, partner, PR Bhuta & Co.